Summit Hotel Properties Under Contract to Acquire Two Hotels
Summit Hotel Properties, Inc. (NYSE:INN) announced that it has two hotel properties, containing an aggregate of 421 guestrooms, under contract to acquire.
The Company announced that it has entered into a definitive agreement to acquire the 210-guestroom DoubleTree by Hilton located in San Francisco, Calif. for a purchase price of approximately $39.0 million. The Company expects to implement approximately $4.1 million in capital improvements to the property prior to year-end 2014 and anticipates an estimated forward capitalization rate in the range of 8.5 percent to 9.5 percent based on management’s current estimate of the Hotel’s 2015 stabilized net operating income.
The hotel was built in 2000 and is undergoing an extensive repositioning and rebranding, converting it from a Radisson to a DoubleTree by Hilton. Prior to acquisition, the seller will complete a portion of the conversion and deliver the property with a DoubleTree by Hilton flag. The Company will deploy the additional capital to complete the repositioning prior to year-end 2014.
“We are thrilled to expand our San Francisco presence with the recently repositioned DoubleTree by Hilton,” said Company President and CEO Dan Hansen. “We see strong upside potential in this newly rebranded property, located in a top market with multiple demand generators, including both an abundant base of corporate demand as well as strong leisure and weekend demand driven by the hotel’s close proximity to the San Francisco International Airport and downtown area.”
The Company also announced that it has entered into a definitive agreement with Mortenson Development to acquire a 211-guestroom Hampton Inn & Suites currently under development in Minneapolis, Minn., for a purchase price of approximately $37.7 million. In January of 2014, the Company issued a $13.1 million letter of credit in support of this acquisition under its senior unsecured credit facility. This agreement is subject to certain conditions, including the completion of the hotel in accordance with agreed upon architectural and engineering designs, receipt of a Hampton Inn & Suites franchise and receipt of a certificate of occupancy.
The Hampton Inn & Suites will be the second property for the Company in downtown Minneapolis, which will have direct access to the Minneapolis Skyway System. The property is conveniently located near the Block E Entertainment District, Target Center, Target Field, the Minneapolis Convention Center and the new Vikings stadium currently under construction. The Mayo Clinic recently announced it will open a 20,000 square-foot sports medicine facility in the current Block E Building, which will be re-named, Mayo Clinic Square. Mayo Clinic Square will also include the previously announced new practice facility and headquarters for the Minnesota Timberwolves and Lynx.
“We look forward to the addition of another high quality asset to our portfolio in a vibrant market such as downtown Minneapolis,” said Hansen. “We are excited to be part of this development opportunity and work with Mortenson throughout the building process.”
The Company expects to complete the San Francisco, Calif. acquisition in the first half of 2014 and anticipates closing on the Minneapolis, Minn. acquisition mid-year 2015. These acquisitions remain subject to satisfactory completion of the Company’s due diligence, including lender consent and satisfaction of customary closing conditions. The Company can give no assurances that the acquisitions will be consummated.
Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused primarily on acquiring and owning premium-branded select-service hotels in the upscale and upper midscale segments of the lodging industry. As of March 07, 2014, the Company’s portfolio consisted of 89 hotels with a total of 11,143 guestrooms located in 22 states.